Jul-2008 Restaurant Pad at Major Mall - Los Angeles County, CA

Comments:

CAM and Building Property Tax Apportionment Errors, Direct Assessment Errors ($177,107) - Upon reviewing the County of Los Angeles’ property tax records (i.e. parcel map, payment history, assessed values, direct assessment districts, supplemental bills etc.), along with reviewing Landlord’s allocation of the taxes to Tenant, RBJ determined that there were three incorrect errors or assumptions made in the Landlord’s apportionment of these taxes between the Premises and the Common Area of the Center. These three discrepancies are described below:

1. The land square footage used in determining the land tax on a square footage basis was incorrectly determined to be 24.61 instead of 26.65. The 24.61 figure used by Landlord did not include the easement square footage included in parcel 13. This easement square footage needs to be included because the land assessed value derived by the County was derived by including the entire square footage of parcel 13. Furthermore, the Direct Assessments (i.e. Flood Control District) levied on this parcel are also calculated by including the entire square footage of parcel 13.

2. The Direct Assessments on the Landlord’s tax apportionment spreadsheet is only allocated to the Common Areas. However, these Direct Assessments are levied by their respective public agency to parcel 13 based on this parcels total land square footage (not just Landlord’s defined Common Area square footage). For example, the Flood Control District’s assessment is levied based on Parcel 13's land square footage (24.61 acres) then multiplied by its land use rate, but the Landlord allocated this assessment, and all other Direct Assessments directly and only to the Common Area Taxes. However, these Direct Assessments are levied by their respective public agency to parcel 13 based on this parcels total land square footage (not just Landlord’s defined Common Area).

3. The Landlord determined that the Common Area is 567,603 square feet. As a result, the land taxes were allocated to the Common Areas based on this incorrect square footage. After obtaining assessor parcel information from the County of LA, it was determined that the Common Area is only approximately 264,673 square feet. Much of the Common Area included by the Landlord was not a part of the Center per the Lease definition of the Center.

Common Area Electricity ($42,321) - It was determined that the Electricity expense allocated to the Common Area was above industry standards for the size and usage of the Common Area. It was then determined that the Common Area only had 19 light poles and a total of 35 lamps. Based on this, along with determining the type of light bulb and usage, we were able to determine the approximate cost for Common Area electricity. Based on the large discrepancy between the Landlord’s actual Common Area Electricity charge, and RBJ’s industry standard approximation, we were able to determine that lights located outside of the Common Area were being included in with the Common Area Electricity charge.

Pro Rata Share of Common Area Charges ($156,149) - Based on information that RBJ gathered from outside sources (i.e. Business License Issuance Dates , Retail Tenant Directory, Co-Star Group, etc.), and based on Tenant’s Lease language, RBJ determined that the Tenant’s pro rata share of the Common Area charges was incorrectly determined by the Landlord.